Question 1

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 2

When preparing the operating activities section of the statement of cash flows using the indirect method, a decrease in accounts receivable is subtracted from net income.

Accepted Answer

A) True 
 B)False

Question 3

A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 4

The cash flow on total assets ratio compared to the total assets ratio can be used as an indicator of earnings quality.

Accepted Answer

A) True 
 B)False

Question 5

Cash flows from interest received on loans are reported in the statement of cash flows as part of:

Accepted Answer

A) Operating activities. 
B) Financing activities. 
C) This is not reported in the statement of cash flows. 
D) Noncash activities. 
E) Investing activities. 
A) Operating activities. 
B) Financing activities. 
C) This is not reported in the statement of cash flows. 
D) Noncash activities. 
E) Investing activities.

Question 6

Scranton, Inc. reports net income of $230,000 for the year ended December 31. It also reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts payable, and a $12,500 decrease in wages payable. Calculate the cash provided (used)in operating activities using the indirect method.

Accepted Answer

A) $356,450. 
B) $376,450. 
C) $263,750. 
D) $319,950. 
E) $351,450. 
A) $356,450. 
B) $376,450. 
C) $263,750. 
D) $319,950. 
E) $351,450.

Question 7

When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in income taxes payable is added to net income.

Accepted Answer

A) True 
 B)False

Question 8

Use the following information to calculate cash paid for wages and salaries: $\begin{array}{l|r}
\text { Salaries expense } & \$ 168,000 \
\hline \text { Salaries payable, January 1 } & 6,400 \
\hline \text { Salaries payable, December 31 } & 10,600
\end{array}$

Accepted Answer

A) $172,200. 
B) $157,400. 
C) $168,000. 
D) $163,800. 
E) $174,400. 
A) $172,200. 
B) $157,400. 
C) $168,000. 
D) $163,800. 
E) $174,400.

Question 9

When the operating activities section of the statement of cash flows is reported using the direct method, the FASB requires:

Accepted Answer

A) The income statement to be prepared under the cash basis of accounting. 
B) The preparation of the statement of cash flows under the indirect method be completed and reported with the statement of cash flows prepared using the direct method. 
C) Footnotes to the financial statements disclosing the difference between net income and the cash provided or used by financing activities. 
D) A reconciliation of net income to net cash provided or used by operating activities. 
E) Noncash investing and financing activities be included in the statement of cash flows. 
A) The income statement to be prepared under the cash basis of accounting. 
B) The preparation of the statement of cash flows under the indirect method be completed and reported with the statement of cash flows prepared using the direct method. 
C) Footnotes to the financial statements disclosing the difference between net income and the cash provided or used by financing activities. 
D) A reconciliation of net income to net cash provided or used by operating activities. 
E) Noncash investing and financing activities be included in the statement of cash flows.

Question 10

The statement of cash flows is:

Accepted Answer

A) A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period. 
B) Another name for the statement of financial position. 
C) A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date. 
D) A financial statement that presents information about changes in equity during a period. 
E) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities. 
A) A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period. 
B) Another name for the statement of financial position. 
C) A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date. 
D) A financial statement that presents information about changes in equity during a period. 
E) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.

Question 11

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the indirect method.

Accepted Answer

A) True 
 B)False

Question 12

The statement of cash flows reports:

Accepted Answer

A) Cash inflows and cash outflows for an accounting period. 
B) Changes in equity. 
C) Equity, net income, and dividends. 
D) Assets, liabilities, and equity. 
E) Revenues, gains, expenses, and losses. 
A) Cash inflows and cash outflows for an accounting period. 
B) Changes in equity. 
C) Equity, net income, and dividends. 
D) Assets, liabilities, and equity. 
E) Revenues, gains, expenses, and losses.

Question 13

The payment of cash dividends never changes the balance of retained earnings.

Accepted Answer

A) True 
 B)False

Question 14

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating assets are added to net income.

Accepted Answer

A) True 
 B)False

Question 15

Use the following information to calculate cash received from dividends: $\begin{array}{lr}
\text { Dividends revenue } & \$ 29,800 \
\text { Dividends receivable, January 1 } & 2,600 \
\text { Dividends receivable, December 31 } & 3,400
\end{array}$

Accepted Answer

A) $26,400. 
B) $32,400. 
C) $29,000. 
D) $29,800. 
E) $30,600. 
A) $26,400. 
B) $32,400. 
C) $29,000. 
D) $29,800. 
E) $30,600.

Question 16

A cash-based measure to help business decision makers estimate the amount and timing of cash flows is the cash flow on total assets ratio.

Accepted Answer

A) True 
 B)False

Question 17

When using the indirect method to calculate and report net cash provided or used by operating activities, which of the following is subtracted from net income?

Accepted Answer

A) Decrease in income taxes payable. 
B) Depreciation expense. 
C) Bad debts expense. 
D) Amortization of intangible assets. 
E) Decrease in merchandise inventory. 
A) Decrease in income taxes payable. 
B) Depreciation expense. 
C) Bad debts expense. 
D) Amortization of intangible assets. 
E) Decrease in merchandise inventory.

Question 18

When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating gains are added to net income.

Accepted Answer

A) True 
 B)False

Question 19

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

Accepted Answer

A) Investing activities. 
B) Reconciliation of cash balance. 
C) Operating activities. 
D) Schedule of noncash investing or financing activity. 
E) Financing activities. 
A) Investing activities. 
B) Reconciliation of cash balance. 
C) Operating activities. 
D) Schedule of noncash investing or financing activity. 
E) Financing activities.

Question 20

Cash flows are essentially the same as net income because they are both measured using accrual accounting principles.

Accepted Answer

A) True 
 B)False

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

When preparing the operating activities section of the statement of cash flows using the indirect method, a decrease in accounts receivable is subtracted from net income.

A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.

The cash flow on total assets ratio compared to the total assets ratio can be used as an indicator of earnings quality.

Cash flows from interest received on loans are reported in the statement of cash flows as part of:

When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in income taxes payable is added to net income.

Use the following information to calculate cash paid for wages and salaries: Salaries expense \ 168,000 Salaries payable, January 1 6,400 Salaries payable, December 31 10,600

When the operating activities section of the statement of cash flows is reported using the direct method, the FASB requires:

The statement of cash flows is:

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the indirect method.

The statement of cash flows reports:

The payment of cash dividends never changes the balance of retained earnings.

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating assets are added to net income.

Use the following information to calculate cash received from dividends: Dividends revenue \ 29,800 Dividends receivable, January 1 2,600 Dividends receivable, December 31 3,400

A cash-based measure to help business decision makers estimate the amount and timing of cash flows is the cash flow on total assets ratio.

When using the indirect method to calculate and report net cash provided or used by operating activities, which of the following is subtracted from net income?

When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating gains are added to net income.

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

Cash flows are essentially the same as net income because they are both measured using accrual accounting principles.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Analysis of Financial Statements

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Exam 16: Reporting the Statement of Cash Flows

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

When preparing the operating activities section of the statement of cash flows using the indirect method, a decrease in accounts receivable is subtracted from net income.

A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.

The cash flow on total assets ratio compared to the total assets ratio can be used as an indicator of earnings quality.

Cash flows from interest received on loans are reported in the statement of cash flows as part of:

When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in income taxes payable is added to net income.

Use the following information to calculate cash paid for wages and salaries: Salaries expense \ 168,000 Salaries payable, January 1 6,400 Salaries payable, December 31 10,600

When the operating activities section of the statement of cash flows is reported using the direct method, the FASB requires:

The statement of cash flows is:

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the indirect method.

The statement of cash flows reports:

The payment of cash dividends never changes the balance of retained earnings.

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating assets are added to net income.

Use the following information to calculate cash received from dividends: Dividends revenue \ 29,800 Dividends receivable, January 1 2,600 Dividends receivable, December 31 3,400

A cash-based measure to help business decision makers estimate the amount and timing of cash flows is the cash flow on total assets ratio.

When using the indirect method to calculate and report net cash provided or used by operating activities, which of the following is subtracted from net income?

When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating gains are added to net income.

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

Cash flows are essentially the same as net income because they are both measured using accrual accounting principles.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Analysis of Financial Statements

Filters